The Importance of Active Managers in Limiting Downside Risk

In this discussion, I emphasizes the crucial role of active managers in limiting downside risk and isolating alpha, which is the desired return on investment. Good active managers aim to hedge out certain risks and focus on opportunities while minimizing event and market risks. By doing so, investors can still benefit from a general macro idea or theme while hedging out specific risks. I also explains that limiting downside risk is vital because of simple math. Understanding the importance of active management can help investors make more informed investment decisions.